WASDE: Analysts eye higher US soy carryout, lower Argentina production

In a data heavy week for the market, analysts are expecting the USDA to revise upwards its carry out of US soybean stocks after weeks of disappointing export figures - a move that some brokers are warning could have a big impact on futures.

This Friday the USDA will release its first supply and demand estimate for global agriculture markets for the year with the trade expecting a second successive month of downward revisions for soybean exports out of the US.

In December, the USDA said US stocks would reach 445 million bushels (12.1 million mt) by the end of the crop year, up 25 million bushels on its previous estimate.

And the trade is expecting at least a similar revision.

“Even with a 10-million rise in the US soy crush, this year’s US soybean ending stocks may rise by 25 million to 470 million bushels,” said Jerry Gidel, grain strategist at US-based brokerage Price Futures Group.

The move comes despite November crush figures showing a 3% increase on the same month last year.

Slow exports and export sales, which have been running at about 14% behind the last crop year, have been the main driver, as overall higher global demand has been picked up by Brazil.

In the 2016/2017 crop year, US exports of soybean reached 2.17 billion bushels and the USDA is expecting this to increase 2.3% to 2.25 billion bushels – a figure that the trade sees as unlikely to hit.

According to figures from Futures International, bean export sales now stand at 67.8% of the USDA projection, down 14 percentage points on last year and their lowest in four years.

“There is no, repeat, no way we can come close to the USDA export estimate, and most commercial S&D’s right now are estimating final domestic stocks of beans at anywhere from 525 to 575 mln bushels, compared to the last USDA estimate of 445 mln bushels,” said Charlie Sernatinger, a broker at ED&F Man Financial in a report last week.

South America

Other things to watch out for, brokers say, are a write-down in Argentinian production and an upward revision of Brazil’s.

Continued dryness in Argentina has hampered sowing rates in the north of the country and is threatening yields in the south as La Nina takes its toll on production.

Conversely, neighbouring Brazil has been enjoying ideal growing conditions of above average hours of sunshine and heavy dousing of rain in the evening.

“The last report estimated soybean production in Argentina at 57 million mt, while private analysts expect… Friday’s report to show somewhere between 55-56 million mt," CHS Hedging said in a report Friday.

"Brazil is set to have another near record soybean crop this year with (the) last report estimate at 108 million mt, and private estimates at 110-112 million mt,” the brokerage added.

Other big releases this week include Brazil's food statistics agency Conab, which on Thursday will give its forecast of Brazil production, while on Friday, China is expected to announce its view of supply and demand.